African Minerals Ltd. (AMI), studying a $2 billion iron-ore mine expansion in Sierra Leone, slumped the most in almost a year in London trading after Chief Executive Officer Keith Calder quit.
The stock fell as much as 16 percent, the most since Aug. 24, 2012. Calder, who joined as CEO last August, was replaced by Bernard Pryor, London-based African Minerals said today in a statement. Pryor is a former Anglo American Plc (AAL) executive and became an independent non-executive director in April 2011.
The new CEO “shares the same view as the rest of the board, that African Minerals must first focus on consistent production and lowering costs, and thereafter develop further growth,” Chairman Frank Timis said in the statement.
It declined 14 percent to 211 pence by 3:10 p.m. in London.
African Minerals, with a market value of $1.1 billion, began shipping iron ore used to make steel from its Tonkolili mine November 2011, making it Sierra Leone’s largest producer. Chief Financial Officer Miguel Perry also quit and will be replaced by former Kazakhmys Plc (KAZ) CFO Matthew Hird from Oct. 1.
“From the onset it was clear that Calder’s broader ambition was to grow African Minerals into a diversified miner across West Africa in the near term,” Jefferies Group LLC analyst Seth Rosenfeld said. “Perhaps our greatest concern for African Minerals in recent months was that the company would move too far and too fast into M&A in the coming months.”
Calder said in June the company was studying acquisitions in commodities such as copper and steel-making raw materials. M&A is now at least 1 to 2 years away, Jefferies said today.
“There are significant opportunities in West Africa, across commodities and across countries, that we will be extremely well-positioned to take advantage of,” Calder said in a telephone interview on June 18 from London.
The price of iron ore, the most-shipped commodity after oil, more than tripled in the past decade, encouraging mining companies to expand in new regions, away from traditional hubs such as Brazil and Australia.
“At face value, the change of a CEO after just 12 months is not positive,” Rob Clifford, an analyst at Deutsche Bank AG, wrote today in a note. “At the asset level, production and cost plans remain a focus and are on track.”
Former CEO Alan Watling has been hired as a special adviser to the board and Timis on port and railways, the company said. Watling was CEO from 2009 to 2012.
“Investor confidence could probably decline with both departures and some near-term weakness in the share price would not be surprising,” Citigroup Inc. analysts Michael Flitton and Heath Jansen wrote today.
The company got $1.5 billion of investment from China’s Shandong Iron & Steel Group Co. last year in exchange for 25 percent of the mine. It may seek debt funding from the Asian nation for the Pepel mine expansion that’s estimated to cost $2 billion to $2.5 billion and is scheduled for 2016. The work is expected to boost capacity to 35 million tons a year.
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